Pennsylvania's medical marijuana law may be drifting into monetary haze

Steve Esack

Sen. Daylin Leach, D-Montgomery — who temporarily moonlighted as a medical marijuana lawyer — held a news conference in the state Capitol in which he accused a Bethlehem company of threatening to destroy the law with a lawsuit.

Sen. Daylin Leach, D-Montgomery — who temporarily moonlighted as a medical marijuana lawyer — held a news conference in the state Capitol in which he accused a Bethlehem company of threatening to destroy the law with a lawsuit. (Steve Esack)

Prior to passage of Pennsylvania’s medical marijuana law, politicians and advocates spoke with compassion about how it would provide alternative care to the sick and infirm.

Now altruism could be taking a backseat to capitalism.

As the Heath Department tries to get the industry started, lawsuits are swirling over bids and some companies could be trying to flip licenses they won to grow and process, or dispense medical cannabis.

On Tuesday, state Sen. Daylin Leach, D-Montgomery — one of the law’s biggest backers, and someone who also temporarily moonlighted as a medical marijuana lawyer — held a news conference in the state Capitol in which he accused a Bethlehem company of threatening to destroy the law with a lawsuit.

Keystone Releaf’s lawsuit alleges the Health Department’s mismanaged a secretlicense bidding process that could have been cloaked in “bias [or] favoritism.” As evidence, the suit asserts Keystone’s Releaf’s application was treated unfairly. The suit asks Commonwealth Court to throw out the winning bids and halt the law until the Health Department switches to a more public vetting system.

Leach accused the firm of putting profits ahead of health and safety. If Keystone Releaf’s lawsuit is successful, he said, the entire medical marijuana program would be shut down, hurting the start-up companies and the patients they seek to serve. Keystone Releaf, he said, should drop its request for a court injunction.

“Patients would be unable to get the medicine they need,” Leach said. He was joined by three mothers whose children’s suffer from ailments that could be treated by medical marijuana.

Leach began working for a Philadelphia law firm, Sacks Weston Diamond, that lobbies on behalf of the industry shortly after Gov. Tom Wolf signed the medical marijuana bill into law in April 2016, The Morning Call reported Monday. One of that firm’s clients was among the dozen companies awarded in June a marijuana growing and processing facility license. Leach quit the firm in July to run for Congress.

On Sept. 26, law firm partner Andrew B. Sacks will co-host a campaign fund-raiser for Leach in Philadelphia, according to a flier. The event charges $250 to $5,000 per attendee.

Leach said Tuesday he did no work for the firm’s medical marijuana clients. He could not say if the firm had other clients that failed to win a license. Leach said he only dealt with businesses looking to enter the market if they came into his Senate office with technical questions about the law or its regulations.

“Let’s be clear, I never advocated for them, I never gave them inside information,” Leach said. “I had my staff try to answer technical questions for them.”

More than one losing applicant has sued the Health Department. BrightStar BioMedics, of Luzerne County, has asked Commonwealth Court to overturn the results — but not halt the law.

While those cases wind through court, some winning bidders may be looking for a quick payoff.

The law required grower-processor applicants to have at least $2 million in business capital, with $500,000 of it deposited in a financial institution. Applicants also had to pay $200,000 for an initial permit, and $10,000 for a renewal. Someone looking to open a dispensary needed $150,000 in capital and pay $30,000 for an initial permit and $5,000 for renewals. Applicants also were charged $10,000 and $5,000 nonrefundable fees for growing-process and dispensary applications, respectively.

Leach said he was anecdotally aware of winners trying to shop licenses or investment opportunities. He added that the Legislature tried to limit sales by writing into the law winning applicants had six months to get operations running.

“We didn’t want people to get licenses and flip them,” he said, adding he trusts the Health Department’s vetting process.

Matthew Haverstick, a Philadelphia lawyer who represented a losing applicant in an ongoing appeal, said he has heard some winners are trying to sell their license or are seeking new investors. That may signal a lack of capital, he said, arguing that’s something the state should have foreseen.

“I don’t see how you can win if you don’t have the money to move a project forward,” Haverstick said. “I’m surprised the Department of Health didn’t figure that out in the application process.”

No winners have asked permission to change owners or add investors, department spokeswoman April Hutcheson said. If such a request is made, she said, the law and the department’s internal regulations would require new background checks for prospective winners and investors. A company’s license could be revoked if it does not seek prior written approval for a sale or investor change, she said.

“If one investor pulls out or someone else would own the company, we have to approve each piece of that,” Hutcheson said. “The permits were awarded to the entity that applied for them and individuals that made up those entities. This is not like a liquor license you can sell.”